Currently, consumers can purchase or shop while present at the merchant or vendor's location, or remotely, for instance by ordering over the telephone or through an electronic device over computer network like the internet. Payment for both local and remote purchases can be accomplished electronically by providing the merchant with an account identifier (credit card or debit card number, bank account number associated with a check, vendor's customer account, etc) through which payment can be authorized and funds can be transferred. The merchant generally receives the account identifier from the customer and bundles the identifier with the sale amount into a request for payment authorization. This request is generally forwarded electronically to an intermediary vendor to process the request for payment with the institution holding the customer's account, such as the credit card issuer, bank or other financial institution.
Such a payment system is subject to manipulation, theft and fraud due to the ease of access to the account information and difficultly in verifying the identifying of the person offering the account information as an authorized account user. For instance, if a credit card or credit card number is presented to the merchant, or input into an unsecured internet site, the merchant has access to the account information and the user's personal information, and such can be copied and later used by the unscrupulous employees for purchases. Scanning the card at the merchants location, or inputting a card into a secured internet site, can help alleviate theft of the consumers account information as the actual account information is not “visible” by the merchant's employees but is processed electronically. In a voice transaction, however, such as by ordering over the telephone, the account information is generally unprotected and subject to errors, particularly if a call center is handling the transaction.
The problems with theft of account information are well known, and various means have been implemented to combat theft and fraud. For instance, some account issuing institutions are now offering an “account identifier” that is valid for a single transaction. A more secure system is needed to handle payment transactions. In particular, as mobile cell phone technology becomes more prevalent, transactions initiated by cell phone are even more vulnerable due to unsecured nature of the cell path. The problem with cell technology will become event more aggravated due to the convergence of cell phones with internet enabled devices, such as the RIM Blackberry type services. With the expanding adoption of mobile cellular phones, a more secure system is needed to address payment systems for voice transactions. Today there is no method that allows a Purchaser to use a communications device to automatically transmit the Purchaser's pre-stored payment information (credit card number, bank account number, PIN, verification address, etc.) and other information necessary to complete a purchase. Additionally there is not a system that allows the financial institution to reduce its exposure to fraud by eliminating the verbal communication of credit or banking information, providing the additional security of having the Purchaser physically inputting a PIN number and the ability to grab the Purchaser's called ID or Internet address to further confirm the Purchaser's identity.
Transactions conducted over the Internet require the consumer to input the same information as required for a verbal order, which exposes the consumer to the possibility of the theft of the consumer's credit or debit card information and the consumer's personal data. Transactions where the card holder is not physically present are known as “card not present” or “MOTO” (mail order/telephone order) transactions.
Card Verification Value (CVV2) which is also known as CVC2 or Card Identification Number (CID) has been in use for over ten years. The system is basically a 3 digit or 4 digit numbers printed on the credit card separate from the actual credit card number and is not on the magnetic stripe. The merchant, whether via the Internet or telephone, asks for the number at the same time the card number is provided to the merchant. This number is then passed along to the verifying institution, which confirms that the card is in the presence of the cardholder. This method is subject to fraud, such as in the case of a criminal obtaining the credit card number may just as easily copy the CVV2 number. When cards are swiped and thus stolen electronically, the CVV2 number is copied at the time of the swiping and provided to whomever the card number is sold.
MasterCard's most recent security enhancement, in response to consumer demand for greater security and privacy in card not present transactions, implemented a system MasterCard named “MasterCard SecureCode”. This system requires that the consumer, in an Internet transaction, to input a private code (that has been given to the consumer by the bank that issued the card), name address, etc., into a “pop-up” screen that appears on the Merchant's web page when the consumer has notified the web page that the consumer has completed the order. The consumer then inputs his/her private code and the authentication value is then passed along to the issuing bank in the merchant's normal authorization process. Using the MasterCard SecureCode system thus eliminates the possibility of “one click” purchasing, requires that the merchant install a SecureCode compliant “plug-in” application on the merchant's web site, and still provides the merchant with the consumer's credit card and other personal data. This method, while improving security over the previously existing system, is cumbersome and does not accomplish the objective of keeping the consumer's card number and personal information hidden from the merchant and improve ease of use by the cardholder. This method does not allow for notification to the consumer of the purchase, nor does it add security or ease of use to transactions conducted verbally using a cell phone or land based telephone.
Visa's most recent security solution is called “Verified by Visa” and using Three Domain security (3D or 3D-Secure), which operates by the cardholder inputting a personal identification number (PIN) into the merchant's web site when requested. This solution does not work on telephone sales (as the PIN would have to be verbally given to the merchant's call center employee) and is cumbersome to operate on the Internet.
The Verified by Visa process works in the following steps in an Internet transaction:
1. The cardholder enters payment details using the merchant's web page.
2. The cardholder is automatically directed to the card issuer's server, who generates a pop-up screen on the consumer's computer.
3. The issuer authenticates the cardholder via the cardholder inputting his/her PIN number of password.
4. The issuer then transmits to the cardholder a digitally signed approval, which is then retransmitted to the merchant's server to begin the normal credit approval process.
5. The normal credit approval process begins after the authentication process in order for the digital authorization from Visa to be included with the authorization request from the Merchant to Visa or, more likely, the authorization service for the card issuer.
Verified by Visa requires that the cardholder send the purchase authorization request from the consumer's computer to the merchant, who then send the request to Visa's server, who then sends the request to the issuer's server. The issuer's server prompts for the password from the consumer, who then inputs the password or PIN, sends it to the issuer's server who then sends it to their (the issuer's) authentication server. The issuer's server then sends the approval to the consumer's computer who then passes the approval to the merchant's server. Then the merchant processes the payment for approval in the normal approval process and includes the authentication data along with the approval request to the card issuer for credit approval. Verified by Visa is cumbersome and will not work on telephone orders, and offers little compensation to consumers while taking more time to complete the transaction. Verified by Visa does not add the functionality of auto-filling forms on the Internet Merchant (or other merchants') customer relationship management (CRM) systems, allow “one-click purchasing’, ties up Visa, the merchant and the authorization entity's servers, increases communications between all of these servers, thus increasing the possibility of a communications error or drop, and still exposes the cardholder's data to theft.
Surrogate Card Numbers have been tried by American Express (Private Payments) and by MBNA (ShopSafe). The surrogate card number is basically a system where the consumer uses a software application to generate a one-use credit card number that has a short validity period (normally two months or less) and a fixed charge value. The surrogate card number is tied to the consumer's “real” card number. This method is cumbersome (the consumer has to obtain the surrogate number and then keep track of it) and prevents the use of one click purchasing. Besides these issues, if surrogate numbers become widespread then, based on the current length of a credit card number (16 digits normally) there would soon be a shortage of numbers available. Of the 16 digits only 10 are available for actual account numbers as the other numbers designate the type of card, etc. With only ten digits available then there would be only ten billion possible card numbers—as there are over 700 million credit cards issued in the United States today that means that there would only be slightly more than 9 numbers available for each card—if just the numbers in the United States were used as a basis for the universe of total numbers. The Nilson Report, in its March, 2004 issue #807, listed total worldwide general purpose credit cards (excluding the store and gas named credit cards) totaled 1.96 billion. Using the worldwide number of bank credit and debit cards would thus leave only eight surrogate numbers per primary card.
None of the above existing methods are an elegant end solution that incorporates additional layers of security for both verbal and Internet transactions. Nor do any of the existing methods solve the combined problems of security, ease of use, and allow for one-click purchasing. Nor do any of the existing methods improve the accuracy and speed of the remote sales (MOTO) type transaction. Several of the above methods require additional hardware to implement and many increase the volume of communications (and thus the possibility for information theft and communications break down).
Currently in a normal MOTO or Internet transaction when there is a chargeback to the merchant the issuing bank and the consumer are fully repaid for the fraud loss. The merchant losses not only the amount of the chargeback, which he/she only received 97% to 98% of to start with (the merchant receives funds from the card issuer after deducting the card company's discount and fees) but also is charged in many instances a fee equal to $10.00 or more per transaction or more along with any shipping and handling charges that the merchant paid third parties.
On attempt to deal with these issues is with “smart cards” (example U.S. Pat. No. 5,317,636 (Vizcaino) and will increase the security and usability of the smart card. The smart card detailed in this patent generates a “transaction sequence number” that must be verified as correct by the authorizing computer. In order to be verified the transaction sequence number from the smart card must match the number in memory on the authorizing computer. The Vizcaino invention also provides for encryption and decryption of the data stored on the smart card, but the de-encryption algorithm on the approval computer must match the algorithm on the smart chip. This patent requires a smart card reader, does not allow for the autopopulating of merchant's consumer relationship management system software of the consumer's data and is not readily adaptable to telephone orders.